Lawsuit on Shell Drilling May Become ‘Backdoor’ Ban, Odum Says

A lawsuit by environmental groups over Royal Dutch Shell Plc (RDSA)’s oil drilling in the Gulf of Mexico may become a “backdoor moratorium” that curtails U.S. development, said Marvin Odum, the company’s U.S. president.

The Natural Resources Defense Council of New York and Oakland, California-based Earthjustice said Obama administration approval of a Shell exploration plan for the Gulf’s deep waters violates environmental laws and should be withdrawn, according to June 9 petitions.

“This suit has the potential to virtually halt exploration in the Gulf, serving as a backdoor moratorium,” Odum said in remarks prepared today for a speech at the U.S. Chamber of Commerce in Washington. “Many of us here today may have different opinions on the drilling moratorium in the Gulf after last year’s spill. But it was long and painful both in terms of jobs and economic losses.”

Shell, Europe’s largest oil company, was first to win approval for its deep-water drilling plans after the BP Plc oil spill led the U.S. to toughen the environmental reviews. The April 20, 2010, explosion of a drilling rig led President Barack Obama to ban deep-water exploration until mid-October.

Odum said the U.S. regulatory system is “reactionary” and overburdened. He cited Alaska, where The Hague-based company hasn’t been allowed to drill after spending more than $2 billion to acquire offshore leases.

“There are some encouraging signs,” he said. “The president created a cabinet-level interagency working group on energy development and permitting in Alaska. This is an important step and recognition that the current regulatory apparatus was not up to the challenge of efficiency permitting a project such as this.”

Shell needs about 35 permits to drill as many as two wells a year in the Beaufort Sea and as many as three a year in the Chukchi Sea from 2012 through 2013. These waters may produce 700,000 barrels of oil per day for 40 years, Peter Slaiby, Shell Alaska’s vice president, said yesterday.

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net